Where’s the next boom? Maybe in `cleantech’

October 6, 2009

Energy breakthroughs could be the next big thing, but how many jobs can they generate?

By Jordan Robertson, AP Technology Writer
9:33 pm EDT, Tuesday October 6, 2009

SAN FRANCISCO (AP) — Our economy sure could use the Next Big Thing. Something on the scale of railroads, automobiles or the Internet — the kind of breakthrough that emerges every so often and builds industries, generates jobs and mints fortunes.

Silicon Valley investors are pointing to something called cleantech — alternative energy, more efficient power distribution and new ways to store electricity, all with minimal impact to the environment — as a candidate for the next boom.

And while no two booms are exactly alike, some hallmarks are already showing up.

Despite last fall’s financial meltdown, public and private investments are pouring in, fueling startups and reinvigorating established companies. The political and social climates are favorable. If it takes off, cleantech could seep into every part of the economy and our lives.

Some of the biggest booms first blossomed during recessions. The telephone and phonograph were developed during the depression of the 1870s. The integrated circuit, a milestone in electronics, was invented in the recessionary year of 1958. Personal computers went mainstream, spawning a huge industry, in the slumping early 1980s.

A year into the Great Recession, innovation isn’t slowing. This time, it’s better batteries, more efficient solar cells, smarter appliances and electric cars, not to mention all the infrastructure needed to support the new ways energy will be generated and the new ways we’ll be using it.

Yet for all the benefits that might be spawned by cleantech breakthroughs, no one knows how many jobs might be created — or how many old jobs might be cannibalized. It also remains to be seen whether Americans will clamor for any of its products.

Still, big bets are being placed. The Obama administration is pledging to invest $150 billion over the next decade on energy technology and says that could create 5 million jobs. This recession has wiped out 7.2 million.

And cleantech is on track to be the dominant force in venture capital investments over the next few years, supplanting biotechnology and software. Venture capitalists have poured $8.7 billion into energy-related startups in the U.S. since 2006.

That pales in comparison with the dot-com boom, when venture cash sometimes topped $10 billion in a single quarter. But the momentum surrounding clean energy is reminiscent of the Internet’s early days. Among the similarities: Although big projects are still dominated by large companies, the scale of the challenges requires innovation by smaller firms that hope to be tomorrow’s giants.

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Arch Coal Attracts Soros as Peabody Lures Citadel

November 24, 2008

By Arijit Ghosh and Christopher Martin

Nov. 24 (Bloomberg) — Billionaire investor George Soros, Citadel Investment Group LLC and T. Rowe Price Group Inc. are snapping up coal mining shares, taking advantage of the cheapest valuations in five years as demand for electricity rises.

Soros bought 2.9 million Arch Coal Inc. (ACI) shares last quarter for a 2 percent stake in the second-largest U.S. coal producer, filings with the Securities and Exchange Commission show. Citadel, the Chicago-based hedge fund, and Invesco Ltd. in Atlanta bought 3.5 million shares of Peabody Energy Corp. (BTU), the biggest miner. T. Rowe reported purchasing stock in Peabody, Arch, Consol Energy Inc. (CNX) and Indonesia’s PT Bumi Resources.

While coal, the cheapest fuel for power, is up 88 percent in Pennsylvania, shares of the companies that mine the mineral have slumped along with the rest of the commodities industry. Now, investors are betting that Peabody, which traded at 3.7 times projected 2009 earnings as of Nov. 21, and Arch at 2.5 times are cheap because coal use will increase. The valuations were at more than a 54 percent discount to the MSCI World/Energy Index.

“Coal is the best commodity to get into right now,” said Daniel Rice, manager of BlackRock Advisors Inc.’s $1.5 billion Global Resources Fund in Boston, which is among the largest holders of Peabody and Arch. “It’s a lot less sensitive to downturns because it’s needed for basic power generation, and demand is growing.”

Crude oil in New York has dropped 43 percent this year compared with a 6.1 percent decline in Australian coal prices.

Consol surged $4.08, or 20 percent, to $24.88 in New York Stock Exchange composite trading. Peabody climbed $2.82, or 15 percent, to $21.57 and Arch Coal rose $1.40, or 11 percent, to $13.70.

Electricity Demand

Demand for electricity in major economies, where coal is used to generate 52 percent of power, will increase 3.3 percent by 2010, according to a UBS AG report on Nov. 17. Global coal use will rise 2 percent a year through 2030, led by China and India, the Paris-based International Energy Agency said Nov. 6.

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